Making Passive Income is more a need today than a desire given the economic recession and decreasing income for people at large. A lot of people today are misled by the word Passive Income as the information available on the internet mostly directs them towards skill-based passive income which also requires an immense amount of continuous-time involvement, which really isn’t passive income, its side income. This is mostly by making online courses, Youtube videos, Multi-Level marketing, etc.
However, that’s not a dead-end, there is still a big ray of hope which is utilizing your existing WEALTH. This is the simplest way to ensure positive cash flow. There are two types of people in this world: One, Those who are able to make the best use of the resources available to them, Two, Of course, the ones who are not able to do that.
In order to fall in the first category (because who wants to be in the second one? Duh!), you need to make sure that anything which can add value to your existing prosperity should be utilised and research suggests that Wealth is the most underutilised thing a human possesses. Your Wealth requires your attention and some management. Make sure to invest the wealth in various assets depending on your need and risk taking ability so that you get something positive from this system that you create. Passive Income generation may look like a big task to many but with the right approach and guidance, one can make a great difference in your finances and also fall in the first category of people.
Here are some of the asset classes we can invest our fortune in and make way for some extra money.
1. Real Estate
We all own property, it could be both ancestral or self-bought but not all property that we own is an asset. It will surely be falling under the category of Real Estate but whether it will be an asset or not is something that you need to decide by taking the right decision. If the real estate is paying you money, ( rents minus expenses and mortgage payments, leaving positive cash flow) it’s an asset and If you pay out money for your real estate, such as a building or a bungalow you buy for your own use, and pay realty taxes, insurance, utilities, maintenance, repairs, and mortgage payments it’s a liability. Focus should be to acquire only such real estates which are going to bring in positive cash flow in the form of rent and get rid of all the real estate that is left idle and is not bringing any positive cash inflow.
Gold is a very liquid asset and depending on the qualities that it possesses it is one of the most valuable assets accepted by all the experts. It is scarce in nature and thus it is bought as a luxury good and is good for investments. Gold can be a source of long term returns, an asset which can mitigate losses in times of market not doing well, and overall enhancer of the portfolio, and a highly liquid asset with no credit risk. Investing in Gold bonds can enhance return as well as create regular passive income if done right.
3. Fixed Deposits
A fixed deposit is a financial instrument where an investor gives a certain sum of money to a bank or a financial institution(company) and the entity pays interest for the duration of the deposit. The rate of interest paid varies depending on the time period. It is the most popular asset class among Conservative investors due to the risk being very low and it also has an easy process of investment. All you have to check is the interest rate, time period and make sure the bank is doing good (the last point being critical in the current times). Fixed Deposits gives guaranteed returns, is easily withdrawable and is flexible in nature. Where most people get stuck is getting only focusing on bank based fixed deposits, whereas there are Corporate FDs as well which without a very high return can still fetch better than market returns.
4. Stocks and Equity
Equities are shares of ownership issued by publicly-traded companies. They are traded on stock exchanges such as NSE and BSE . You can potentially profit from equities either through a rise in the share price and make almost guaranteed fixed passive income by receiving dividends which are announced as per the performance of the company. The asset class of stocks can be subdivided by market capitalization into small-cap, mid-cap, and large-cap stocks. One must know that the investment in equities or stocks may give you great returns only if you have the patience to hold on to it because for people who are not really good into technicalities of choosing a good stock, the hack is to invest in long-term index funds. Index is already made of few of the highest performing stocks and thus it is a safer and smarter way to invest in Index funds. In case you want to earn by doing the buying and selling every other day, then you need to invest your time and efforts in first learning how to do it and then actually do it which makes it a good task to do, you might wanna hire professionals for that!
5. Bonds and Other Debt Funds
Bonds and debt funds are another great Investment avenue that comes with low risk and moderate returns, this is also called Fixed-income Investments. Fixed-income investments are investments in debt securities that pay a rate of return in the form of interest. It is a more secured asset as in India bonds are mostly issued by the govt., although corporations too issue bonds now but they are still much safer than the equities or stocks.
Hence, the key question of How to create Passive Income in India isn’t really that hard. All that is required is a system that ensures these simple ways of making passive income are inculcated in the wealth and its management, as a result delivering period sustainable passive income to any individual irrespective of their skillset.